According to the Business Society Spot News, in the first half of May, the formaldehyde market continued the weak adjustment trend of the second half of April, showing a pattern of “weak cost support, weak demand, and downward price fluctuations”. Short term supply and demand are difficult to change, and the price center continues to decline, stabilizing and rebounding after a slight bottoming out in the middle and late of the month. As of May 13th, the average price of formaldehyde in Shandong Province was reported at 1357 yuan/ton, a decrease of 2.07% from the beginning of the month and at a mid to high level for the year.
Driving factor analysis
1. Cost side: Weakening of methanol, profit compression forcing concessions
The price of raw material methanol first rose and then fell in the first half of May, with an overall decline of about 4.6%, which was significantly greater than that of formaldehyde, and the cost support continued to weaken.
The decline in methanol prices has significantly compressed the profit margins of formaldehyde enterprises, and the industry’s willingness to proactively offer discounts for shipments has increased, further amplifying the downward pressure on prices.
Short term methanol lacks significant rebound momentum, and the weak cost support pattern is difficult to change, making it difficult to form an effective bottom line for formaldehyde prices.
2. Demand side: The terminal is weak, and there is little incremental demand driven by essential needs
The operating rate of the downstream artificial board industry is less than 50%, and the sluggish real estate industry continues to drag down terminal orders. The procurement of supporting industries such as adhesives and coatings is mainly for essential needs, and the market’s willingness to replenish inventory is weak, lacking the demand increment brought by centralized stocking.
The traditional off-season effect combined with the approaching high temperature weather has led downstream enterprises to be cautious about future expectations and adopt a strategy of “buy as you go”, resulting in light market trading and difficulty in driving prices.
3. Supply side: Low operating levels+inventory accumulation, difficult to change loose pattern
The industry’s operating rate remains low, and the contraction effect of some equipment maintenance on supply is offset by the accumulation of enterprise inventory. The overall market supply is still relatively loose.
Market forecast:
Short term weakness bottoming out, the downward momentum gradually diminishing. The current bearish trend of “negative expansion” will continue, but as prices approach the medium to long-term cost line, the downward momentum will gradually weaken, and the overall pattern will be “weak bottoming out and low-level oscillation”.
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